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Japan’s dazzling economy was second only to the U.S., with incredible technological leadership, industrial productivity, and an enormous trade surplus. Then it collapsed into three decades of stagnation. Symptoms of the disease that destroyed its dominance – asset bubbles, central bank distortion, and ageing populations – are showing up in the U.S., U.K., and beyond. Are we doomed to repeat Japan’s fatal financial errors, or is there time to make the necessary corrections?
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A Quick Recap: What Happened in Japan?
- 1980s: Japan’s stock market (Nikkei 225) boomed, along with property prices, fuelled by speculative mania and low interest rates
- 1989: The Nikkei peaked at 39,000 points in December – a level not seen again until 34 years later – and the crash started
- 1991-2010s: Despite quantitative easing, ultra-low rates, and other fiscal stimuli, the “Lost Decade” became the “Lost Decades”, with Japan stuck in a cycle of deflation, decreasing wages, and weak overall growth
- 2024: In February – more than 34 years after the previous high – the Nikkei finally returned to 39,000 points, and it hasn’t grown since
So, What Went So Wrong?
A recipe for disaster that crippled the world’s second strongest economy. Some of which we can see re-appearing today in the West:
- Asset Bubble: Overvalued stocks and property thanks to deregulation and easy money
- Debt Overhand: Banks continued committing to risky loans that consumers and businesses couldn’t repay
- Policy Paralysis: A lack of structural reform, while depending on repeated short-term stimuli, stalled recovery
- Demographics: Japan’s birthrate plummeted in the 1990s, reducing domestic demand
Familiar Patterns: Yes, You’re Really Seeing the Same Symptoms
- Asset Inflation: U.S. equities have gained over 500%, fuelled by quantitative easing and record-low interest rates, while the U.K.’s property prices have outgrown wage increases by more than 5x
- Ageing Population: While slower than Japan, the population of the U.S. is still ageing significantly, while the over-65 demographic in the U.K. is set to double by 2050
- Low Productivity: Both countries have seen a continued decline in productivity growth since the early 2000s
- Central Bank Addiction: The Fed and Bank of England have been relying heavily on ultra-low rates and quantitative easing, just like the Bank of Japan did, creating distorted financial markets
Lessons Still Being Ignored
The West appears ignorant to the signs. Without addressing the growing concerns, we are doomed to see the same result that has plagued Japan for decades.
- You can’t stimulate forever: Japan tried. It led to zombified companies and weak innovation
- Demographics matter: Ageing reduces consumption and productivity. No amount of monetary policy fixes this
- Structural reform is hard but necessary: Japan delayed. The U.S. and U.K. appear to be doing the same
- Markets can stay broken for decades: It took Japan over 30 years to reclaim its stock market peak
What This All Means For You
There are real, tangible effects for the everyday working people of countries when bubbles burst like they did in 1990s Japan. Your future, and that for your family, could feel the after-shock for years to come.
- Your pension may be tied to inflated assets that don’t reflect real growth.
- Housing may remain unaffordable for a generation — then crash when demographics shift.
- Growth may slow, but inflation may stay — a painful combo for wages and savings.
- Policy leaders may be repeating history, not rewriting it.
The Social and Cultural Impacts of Long-Term Stagnation
It’s not just a country’s finances that suffer in these circumstances. Japan’s economic stagnation also reshaped its culture, and warns us of what we could expect should we continue down the same path:
- A disillusioned youth: A whole generation grew up in Japan with a no-growth economy, which led to further declining birth rates, falling consumption, and an abandonment of traditional lifestyles for many
- Workforce malaise: Lifetime employment coupled with wage stagnation led to widespread burnout, and later to rising cases of “karoshi” – death by overworking
- Risk aversion: Households and businesses became more conservative in their everyday approach, meaning innovation slowed down and consumer behaviour rooted itself to the safe options rather than the ambitious
Youth anxiety, delayed home ownership, a cultural mood shift, and stale or shrinking wages for most – it all sounds very familiar. Are we seeing this unfold in front of our eyes?
Final Thought
Japan’s crisis didn’t come with a bang. It was slow, quiet, corrosive, and poisonous from the inside. Looking back at how it unfolded, it seems it was inevitable. But when we see the same symptoms appear in our countries today, it feels like everybody believes that we can’t possibly face the same consequences.
The West looks to be on a similar path to 1990s Japan, plagued by all of the same problems that we saw before. Will we look back on this period in 30 years and say it was inevitable too?
Join the Conversation
Do you think we’re repeating Japan’s mistakes? Can governments break the cycle, or are we already too deep? Add your comments below.
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Categories: Did You Know?, World News
So pay pensioners a good income and prevent economic erosion by demographics.
‘Never thought of that one did you.
“it feels like everybody believes that we can’t possibly face the same consequences.”
Obvious BS. Don’t know where you get your “feels” but it’s quite clear that the majority of the U.S. population knows well the U.S. is decaying economically and in precisely the ways you describe.
Further “we’re repeating Japan’s mistakes” is also BS. There is no “we”, there is only an overarching global financial control mechanisn that runs everything. The idea that rich oligarchs got that way by making “mistakes” is a lie and counter productive. Call it what it is: evil people taking from others.
We do need to stamp out the idea that rich psychopaths got filthy rich by making “mistakes”. Snap out of the comfortable delusions and lay moral judgement exactly where it belongs.
Hi Plebney,
Who do you think was to blame for Japan’s decline? Interested to know who you would hold culpable for it – and how the West could avoid the same errors in the near future.
Cheers,
G Calder
See “Princes of Yen”, a documentary based on Prof Richard Werner who lived in Japan for 12 years. From memory, when I watched it a few years ago, the Central Bank of Japan did a massive “Pump and Dump”. That is, they printed so much money it was in a massive bubble that was only apparent in hindsight. After the bubble burst (and they were in a big depression) Japanese politicians begged the Central Bank to stimulate again, but this was refused unless the govt agreed to “Structural Reforms”, which I took to mean “changes in law to give even more power to the Central Bank”. A fascinating account. (1:30hr)
https://www.youtube.com/watch?v=p5Ac7ap_MAY
Hi P T,
Thanks for your insight here. It’s a fascinating angle that huge money printing caused Japan’s financial issues, as it’s yet another parallel we’re seeing now in the West. Will take a look at the documentary.
G Calder
And now instead of “mistakes” it’s “errors”.
Systems do exactly what they are designed to do. Is this case, strip value from the general populace and concentrate it in the hands of very few. Systems only operate through the agency of individual persons who sign the papers, give the orders, lie the lies. Since it is easy to identify these people and you know how to do so, your comment is disingenuous. It’s the standard Yahoo type “you’re wrong unless you do rresearch for me” comment.
Global financial tycoons, promoting the slogans of “sustainable development”, in practice force national economies to strive to maximize economic growth rates. Making economic growth a determinant of progress is a factor in enslaving local economies through the inevitable indebtedness in such a situation. I recommend articles that discuss the role of debt in enslaving and confronting false growth with real growth.
https://www.globalresearch.ca/us-world-fell-hands-international-private-bankers/5880136
https://www.globalresearch.ca/fake-sustainability-vs-real-sustainability/5860714?utm_campaign=magnet&utm_source=article_page&utm_medium=related_articles
The pursuit of growth causes irreversible damage because the increase in production must be consumed, i.e. disposable items are designed and produced, forcing consumers to constantly buy new disposable items. In this way, the Earth is becoming a global garbage dump in an accelerating process of littering with products that are assumed to quickly lose their functionality. Campaigns calling for environmental protection by recycling garbage are just propaganda financed by the biggest beneficiaries of growth, i.e. producers of single-use garbage.
In the article, stagnation in Japan is described as a sign of failure. What is stagnation according to the encyclopedia definition: “Economic stagnation – a state of the economy in which, in the long term, the volume of production, income of economic entities, investment outlays and trade turnover remain at a relatively constant level”
So stagnation is actually the opposite of economic growth. Let’s ask ourselves what could be better for our Blue Planet: unbridled growth or stagnation as a symptom of balance.
Perhaps the Japanese, after a period of intense growth in the 1980s, they understood that the pursuit of growth in all areas of life comes at the cost of subordination to the growth regime. The requirement to adapt to economic growth affects the collective life of society, but also family and individual life, forcing behavior that, while bringing material effects, requires the sacrifice of total subordination. Attempts to replace spirituality with access to material goods will always be doomed to failure, which will first manifest itself in individual discoveries of the sense of meaning in life, which will gradually acquire a broad social dimension.
It is possible that the Japanese, after being excited about the material effects of growth, saw that it was a compelling trap from which the way to liberation was to first balance needs and then adopt sustainable paths to achieve goals that meet balanced needs.
I wish the Japanese success in developing a satisfactory model of sustainability, which currently takes the form of stagnation in this constantly intrusive promotion of growth as a divine factor of progress.
Hi Jack,
This is a very interesting alternative view on the topic. Thanks for your input and the additional sources.
Regards,
G Calder
Meh. Japan hates sex. Sony destroyed Betamax as they would not sell stuff to pornographers. So the inferior VHS tapes dominated and Betamax failed. Japan also went all out to support feminism. Their youth listened, and the boys avoided approaching young girls for sex. Boys found outlets in VHS porn from other countries. The pixelated naughty parts of Japanese girls looked like shredding machines meant to rip the genital parts of men to shreds. Japanese boys feared approaching the genital shredding girls. Maybe just phycological, but institutionalized feminism is exactly that.
Their camera industry fell apart. The who wants cameras that cannot focus of the interesting bits in the pictures.
I maybe exaggerate a little bit. But censorship must die. It is impossible. There are over 8 billion horny humans in this world, and industry had made over 7 billion cell phones, most with cameras. Expecting to stop porn with censorship is like trying to stop phony global warming by telling people to stop exhaling carbon dioxide.
[…] no secret that Japan has been on poor economic form in the past few decades — we published a piece about this recently — and with almost non-existent growth, a shrinking population, and the general perception […]